Cutbacks crimp end-of-year car deals

Published 12:00 am, Saturday, September 25, 2010

September traditionally has been a month for good deals on cars, but this year, not so much.

Automakers cut back on production in the past year to keep pace with the recession. That means there are fewer excess vehicles sitting on dealers' lots and less desperation to clear room for the new models rolling in.

“Inventory for the Chevrolet dealers is real light or real tight, depending on how you want to look at it,” said John Wommack, owner of Wommack Chevrolet in Castroville. “GM is trying real hard to keep its dealers on a 60-day or less supply, mainly so they don't have to be throwing the $10,000 rebates out there to help us move the product.”

U.S. automakers have taken advantage of new labor agreements, the result of the bankruptcies of General Motors Co. and Chrysler Group, to cut production at their factories, San Antonio auto magnate Ernesto Ancira said. Dealers may still knock a few hundred dollars off the price of a car to make a sale, but the big manufacturer incentives are starting to dry up, Ancira said.

“The dealer discounts are always available,” he said. “The big money that comes from the factory, that had gotten to be an everyday event. But now they're starting to go away.”

Industrywide incentive spending this month is at about $2,683 per car sold, about a 2 percent decrease from the $2,750 automakers spent last September, according to projections from TrueCar.com.

The biggest decreases came from Chrysler, which dropped September incentive spending almost 23 percent to $3,787, and General Motors, which dropped incentives to $3,403, a decrease of almost 11 percent.

Despite the fact that they decreased their deals, Chrysler and General Motors were still among the largest spenders on incentives.

Some automakers increased their incentives, though.

Toyota Motor Corp. has increased incentives in response to its recall woes earlier in the year, and Nissan Motor Co. and Honda Motor Co. followed suit in order to stay competitive, said Jesse Toprak, vice president for industry trends at TrueCar.com.

Ford broke the U.S. automaker trend, increasing incentive spending 7.4 percent to $2,797 per vehicle sold, an effort to build on momentum from being the only big U.S. automaker not to take a government bailout, Toprak said.

Manufacturers have gotten better at managing their incentives, he said. They've dropped the blanket offers and make deals only on vehicles they need to move.

At the same time, the manufacturers have taken on a larger portion of incentive offers, Toprak said. About 60 percent of the discount falls to the manufacturer and about 40 percent falls to the dealer, he said. Five years ago, it would have been a 50-50 split.

“The manufacturers' rebates are lower than in past years, and looking at my competitors' advertising and the deals my salespeople are bringing to me ... it seems like us dealers are just as aggressive,” Wommack said.

There will still be deals this year, said Ivan Drury, an analyst with auto research firm Edmunds.com, but it looks like selection will suffer.

“I'd say if you're willing to give up certain things, an option or two here, a color there, then you're not going to be disappointed,” Drury said.

Sales have not been phenomenal this year, so automakers aren't going to abandon incentives altogether. Toprak estimates the 2010 sales total will be 11.6 million units, an improvement from the dismal 10.4 million sales last year but far short of the 14.5 million he said would be healthy.

But manufacturers cut production so much that they're having a hard time keeping some models on the lot. The Asian automakers already have moved through most of their 2010 inventory, Drury said. For example, Nissan already has sold 90 percent of its 2010 vehicles.

The U.S. automakers have some hot products that they can't build enough of. The Chevrolet Equinox, Ford Fiesta and Jeep Grand Cherokee are all selling well, he said.

In Texas, it's Camaros, Corvettes and pickups that won't stay on the lot, said Lovell Lloyd, general sales manager of Knapp Chevrolet in downtown Houston. Lloyd said the dealership has had to buy inventory from dealers in Arkansas and Minnesota.

General Motors is offering about $3,000 in incentives for its 2010 SUVs and about $1,000 for its 2011 SUVs, he said.

“Last year, I'm 90 percent sure we had more incentives,” Lloyd said.

And while there are still deals out there this month, Edmunds' Drury warned buyers not to go out expecting the usual September sales.

“The dealer knows you're going in there looking for a deal,” he said. “And if you haven't done your research about how much the car is worth or what incentives are available, you might not be getting a very good deal.”